Francisco v NLRC

Case:

Petition for review on certiorari

FACTS:

1995 – Francisco was hired by Kasei Corporation during its incorporation stage as “Accountant and
Corporate Secretary” and was assigned to handle all the accounting needs of the company. She was also
designated as Liaison officer to the City of Makati to secure business permits, construction permits and
other licenses for the initial operation of the company.

Francisco was not entrusted with the corporate documents neither did she attend any board meeting
even if she was the Corporate Secretary

1996 – Petitioner was designated Acting Manager. She was assigned to handle recruitment of all
employees and perform management administration functions

Francisco performed the duties of Acting Manager for 5 years.

Dec. 31, 2000 – Her salary was P27,500 plus P3,000 housing allowance and a 10% share in the profit of
Kasei Corporation.

January 2001 – Francisco was replaced by Liza R. Fuentes as Manager. She was required to sign a
prepared resolution for her replacement but she was assured that she would still be connected

Kasei reduced her salary by P2500 per month from Jan-Sept 2001 and she did not receive her mid-year
bonus. October – Francisco did not receive her salary

October 15, 2001 – Francisco asked her salary from Acedo but she was informed that she is no longer
connected with the company.

Francisco filed an action for constructive dismissal before the LA.

Kasei Co. averred that Francisco is not their employee. They alleged that she was one of its technical
consultants and have no control over her since Francisco performed her work at her own discretion.
Petitioner’s designation as technical consultant depended solely upon the will of management. As such,
her consultancy may be terminated any time considering that her services were only temporary in
nature and dependent on the needs of the corporation.

LA Ruled that Francisco was illegally dismissed.

NLRC affirmed the decision of LA with modifications

CA reversed the NLRC decision.

ISSUE:

1. W/N there was an employer-employee relationship

2. W/N Francisco was illegally dismissed

RULING:

1. YES.

Control Test – YES because she was under the direct control and supervision of Seiji Kamura, corp’s
technical consultant.

Economic Reality Test – YES because she had served the company for six years and Francisco is
economically dependent on respondent corporation for her continued employment.

In certain cases the control test is not sufficient to give a complete picture of the relationship between
the parties, owing to the complexity of such a relationship where several positions have been held by
the worker.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s
power to control the employee with respect to the means and methods by which the work is to be
accomplished; and (2) the underlying economic realities of the activity or relationship. This is especially
appropriate in this case where there is no written agreement or terms of reference to base the
relationship on.

Thus, the determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, 22 such as: (1) the extent to which the services
performed are an integral part of the employer’s business; (2) the extent of the worker’s investment in
equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the
worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required
for the success of the claimed independent enterprise; (6) the permanency and duration of the
relationship between the worker and the employer; and (7) the degree of dependency of the worker
upon the employer for his continued employment in that line of business

2. The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month
from January to September 2001. This amounts to an illegal termination of employment, where the
petitioner is entitled to full backwages.

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive
dismissal is an involuntary resignation resulting in cessation of work resorted to when continued
employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to an employee.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated
October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET
ASIDE. The Decision of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
No. 032766-02, is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of
petitioner Angelina Francisco’s full backwages from the time she was illegally terminated until the date
of finality of this decision, and separation pay representing one-half month pay for every year of service,
where a fraction of at least six months shall be considered as one whole year.